the goose

Over the coming months I am going to be reviewing online businesses in Ireland and further abroad in an attempt to provide a state of the union in terms of how automated businesses are developing. There has been a steady evolution (well – maybe not so steady at times) from the mid-nineties as opportunities to ‘win online’ have ebbed closer and closer to the mainstream of business life. With broadband penetration finally reaching reasonable levels in the developed world, practical solutions to real needs are emerging on a daily basis.

The allure of running your business virtually is strong indeed. With potentially less staff, no rent and flexible working arrangements – it seems like making a buck online could be the ultimate in ‘passive income’. Its worth considering what a perfect business would look like. It might be up to each owner to come up with their own metrics, but here is my take on what Utopian businesses might look like.

1. No staff: I love being around motivated enthusiastic people. Good relationships are what make the world a better place to live in. When it comes to making money – people provide a considerable pain in the ass. The classic business owner will leverage other people’s time to improve their own cashflow. Ultimately however, looking after staff is a huge drain on your time and resources. The E-myth promotes developing business systems which are independent of the people that work in that business. Taking this to its extreme, not having any staff at all allows your business to act as a raw cash generating asset – making it attractive for prospective buyers. mytradesman.ie has succesfully managed to create an online money making process without hiring a soul.
2. Subscribers paying a little each month: Subscription payments are a powerful way to make it easy for your customers to pay for your service and ensure that you can meet your bills on a month to month basis. It evens out your cashflow, removing lumps, allowing for you to sleep easy in the knowledge of what is coming in next month. A low price point also makes your customers feel good about the outstanding value you can deliver. The premium rate mobile phone industry have mastered this technique. As the cost of acquiring each customer is high (in terms of TV advertising and press spend) a low monthly cost is levied to make a return over time. Credit card billing is also well suited to this model as are direct debits. The disadvantage with the former is that eventually cards will expire requiring customers to make a re-purchasing decision.
3. Low cost of sale: 3 our every 4 euros spent in most software companies goes on meeting, educating and selling to customers. Perhaps surprisingly, the highest of tech industries still relies on face to face and toe to toe meetings with customers to achieve big ticket sales. If an online income stream is to be successful, its primary benefit must be clear within the first two sentences of any introduction. A clear, simple, compelling benefit that facilitates a fast buying decision helps to avoid spending a fortune and allows your service to scale beyond the number of people you can get in front of. Subscribers to spinvox.com – a company offering to transcribe your voicemails to text messages online- can sign up a customer based on that simple description of the service alone. Its a single sentence which sums up the major benefit – and makes the buying the decision a snap.
4. Low Support costs: Doing the simplest thing that could possibly work to keep your customers happy will make sure your support costs remain low. If you feel that you need to add feature upon feature to bolster the case for your service, perhaps its time to revisit how compelling that services primary benefit really is. 37signals are the pioneers in providing online products that purposefully keep the promise to the customer uncomplicated and easy to fulfill. They go as far as to describe it as “underdoing your competition”.
5. Big fish, little pond: From the day your online business goes live – you have to realise that there is NO technical barrier to potential competitors. No matter how smart your web-designer is or how nerdy your technical team are hundreds of smarter cuter nerds in an offshore haven somewhere – just waiting to reverse engineer your perceived USP (unique selling point). Even if you can answer the $64,000 dollar question, you can be sure that a copycat can too. This is why you need to be the big fish in your small pond. Selecting a niche and promoting your brand in that niche will help to establish your service as THE place to go to scratch a particular itch. daft.ie is an example of a brand name so well known for being outstanding at what it does – that even if their entire site was reverse-engineered, it would make no odds as its the name that has become lodged with the target market beyond repair.

So what would make for your ideal business? Leave a reply and let me know.